Bitwise Ethereum ETF

Previous wording

Decentralized governance of the Ethereum network and potential amendments to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, could have a negative impact on the performance of the Trust.

Current wording

Decentralized governance of the Ethereum network and potential amendments to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, have a negative impact on the performance of the Trust.

Previous wording

The Trust’s operations rely heavily on the Sponsor, whose limited staffing, potential discontinuance, and conflicts of interests could adversely impact the Trust’s management and stability and the value of the Shares.

Current wording

The Trust’s operations rely heavily on the Sponsor, whose limited staffing, potential discontinuance, and conflicts of interest could adversely impact the Trust’s management and stability and the value of the Shares.

Previous wording

The trading prices of many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do so. For instance, there were steep increases in the value of certain digital assets, including ether, over the course of 2017, followed by steep drawdowns throughout 2018 in digital asset trading prices, including for ether. These drawdowns notwithstanding, digital asset prices, including ether, increased significantly again during 2019, decreased significantly again in the first quarter of 2020 amidst broader market declines as a result of the novel coronavirus outbreak, and increased significantly again over the remainder of 2020 and the first quarter of 2021. Digital asset prices, including ether, continued to experience significant and sudden changes throughout 2021 followed by steep drawdowns in the fourth quarter of 2021, as well as throughout 2022, and digital asset prices have continued to fluctuate through 2023 and to date in 2024.

Current wording

The trading prices of many digital assets, including ether, have experienced extreme volatility in recent periods and may continue to do so. For instance, there were steep increases in the value of certain digital assets, including ether, over the course of 2017, followed by steep drawdowns throughout 2018 in digital asset trading prices, including for ether. These drawdowns notwithstanding, digital asset prices, including ether, increased significantly again during 2019, decreased significantly again in the first quarter of 2020 amidst broader market declines as a result of the novel coronavirus outbreak, and increased significantly again over the remainder of 2020 and the first quarter of 2021. Digital asset prices, including ether, continued to experience significant and sudden changes throughout 2021 followed by steep drawdowns in the fourth quarter of 2021, as well as throughout 2022. Since then, digital asset prices have continued to fluctuate through 2024, 2025, and early 2026.

Previous wording

Blockchain participants, including miners and validators, maintain the record of ownership of digital assets. These participants validate transactions, secure the network, and ensure the integrity of the blockchain. If these entities suffer from cyberattacks or other security incidents (whether from hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or the loss or corruption of data, software, hardware or other computer equipment, or from the inadvertent transmission of computer viruses or other malware, other forms of malicious attacks, malfeasance or negligent acts of their personnel, or via other means, including phishing attacks and other forms of social engineering), or if for financial or other reasons they cease to perform these functions, the functioning of the blockchains on which the ownership of digital assets is recorded and their valuation based may be jeopardized. For instance, if a successful cyberattack were to disable miners or validators, the validation of transactions could be delayed or fail, potentially leading to unauthorized transactions or the loss of digital assets.

Current wording

Blockchain participants, including miners and validators, maintain the record of ownership of digital assets. These participants validate transactions, secure the network, and ensure the integrity of the blockchain. If these entities suffer from cyberattacks or other security incidents (whether from hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or the loss or corruption of data, software, hardware or other computer equipment, or from the inadvertent transmission of computer viruses or other malware, other forms of malicious attacks, malfeasance or negligent acts of their personnel, or via other means, including phishing attacks and other forms of social engineering), or if for financial or other reasons they cease to perform these functions, the functioning of the blockchains on which the ownership of digital assets is recorded and and the basis of their valuation may be jeopardized. For instance, if a successful cyberattack were to disable miners or validators, the validation of transactions could be delayed or fail, potentially leading to unauthorized transactions or the loss of digital assets.

Previous wording

The trading prices of ether have experienced extreme volatility in recent periods and may continue to do so. In 2021, ether experienced significant highs before experiencing substantial declines throughout 2022. This pattern of rapid appreciation followed by steep drawdowns has recurred multiple times, including in 2013-2014, 2017-2018, and 2021-2022. In 2023, ether’s price continued to fluctuate, with a notable low of $1,535.49 on October 12, 2023, and a high of $4,031.50 on March 11, 2024. As of December 31, 2024, ether’s price stands at $3,340.40, reflecting ongoing volatility. Over the past 12 months (using data ending January 5, 2025), ether has exhibited a historical annualized volatility of approximately 62.68% and a maximum annual price decrease of 44.95%.

Current wording

The trading prices of ether have experienced extreme volatility in recent periods and may continue to do so. In 2021, ether experienced significant highs before experiencing substantial declines throughout 2022. This pattern of rapid appreciation followed by steep drawdowns has recurred multiple times, including in 2013-2014, 2017-2018, and 2021-2022. Ether's price has continued to fluctuate, with a notable low of $1,535.49 on October 12, 2023 and a high of $4,031.50 on March 11, 2024. As of December 31, 2025, ether's price stands at $2,971.94, reflecting ongoing volatility. Over the past 12 months (using data ending January 5, 2026), ether has exhibited a historical annualized volatility of approximately 76.67% and a maximum annual price decrease of 60.25%.

Previous wording

Extreme volatility may persist, and the value of the Shares may significantly decline in the future without recovery. The digital asset markets have previously experienced bubble and may do so again in the future. The bankruptcy of major digital asset companies like Celsius Network, Voyager Digital Ltd., and Three Arrows Capital, along with the collapse of TerraUSD and FTX Trading Ltd. (“FTX”) in late 2022 severely impacted confidence in the digital asset market. These events have led to widespread negative publicity, further bankruptcies, and legal actions, highlighting the volatility and risks inherent in Ether and other digital assets.

Current wording

Extreme volatility may persist, and the value of the Shares may significantly decline in the future without recovery. The digital asset markets have previously experienced a bubble and may do so again in the future. The bankruptcy of major digital asset companies like Celsius Network, Voyager Digital Ltd., and Three Arrows Capital, along with the collapse of TerraUSD and FTX Trading Ltd. (“FTX”) in late 2022 severely impacted confidence in the digital asset market. These events have led to widespread negative publicity, further bankruptcies, and legal actions, highlighting the volatility and risks inherent in Ether and other digital assets.

Previous wording

In response to these events (collectively, the "2022 Events"), the digital asset markets experienced extreme price volatility and other entities in the digital asset industry were, and may continue to be, negatively affected, further undermining confidence in the digital asset markets. These events also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital asset markets is negatively impacted by these events, digital asset prices, including ether, may continue to experience significant volatility or price declines and confidence in the digital asset markets may be further undermined.

Current wording

In response to these events, the digital asset markets experienced extreme price volatility and other entities in the digital asset industry were, and may continue to be, negatively affected, further undermining confidence in the digital asset markets. These events also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital asset markets is negatively impacted by these events, digital asset prices, including ether, may continue to experience significant volatility or price declines and confidence in the digital asset markets may be further undermined.

Previous wording

In addition, regulatory and enforcement scrutiny of digital assets has increased, including from, among others, the Department of Justice, the SEC, the CFTC, the White House and Congress, as well as state regulators and authorities. The regulatory landscape for digital assets remains uncertain and continues to evolve. For example, in January 2024, the SEC approved the listing and trading of several bitcoin spot ETFs. This decision came after the U.S. Court of Appeals for the District of Columbia found that the SEC’s previous denial of the Grayscale Bitcoin Trust’s ETF listing was “arbitrary and capricious” due to insufficient explanation, especially given the approval of similar bitcoin futures-based ETFs. For more information regarding regulatory and enforcement scrutiny of digital assets, see the risk factor entitled "Regulatory changes or actions by federal or state executives or legislators may affect the value of the Shares or restrict the use of ether, its validating activity or the operation of its networks or the digital asset markets in a manner that adversely affects the value of the Shares."

Current wording

In addition, regulatory and enforcement scrutiny of digital assets has increased, including from, among others, the DOJ, the SEC, the CFTC, the White House and Congress, as well as state regulators and authorities. The regulatory landscape for digital assets remains uncertain and continues to evolve. For example, in January 2024, the SEC approved the listing and trading of several bitcoin spot ETFs. This decision came after the U.S. Court of Appeals for the District of Columbia found that the SEC’s previous denial of the Grayscale Bitcoin Trust’s ETF listing was “arbitrary and capricious” due to insufficient explanation, especially given the approval of similar bitcoin futures-based ETFs. For more information regarding regulatory and enforcement scrutiny of digital assets, see the risk factor entitled "Regulatory changes or actions by federal or state executives or legislators may affect the value of the Shares or restrict the use of ether, its validating activity or the operation of its networks or the digital asset markets in a manner that adversely affects the value of the Shares."

Previous wording

While the Merge significantly reduced Ethereum’s energy consumption by approximately 99.95%, it did not immediately address all scalability challenges. Subsequent upgrades, such as the “Dencun” update in March 2024, have been implemented to further enhance scalability and efficiency. This planned fork introduced several Ethereum Improvement Proposals ("EIPs"), including EIP 4844, aimed at reducing transaction fees for Layer 2 solutions by providing temporary storage spaces called Binary Large Objects (“blobs”) on the Layer 1 Ethereum network. This change is expected to lower costs for Layer 2 solutions by storing batched transactions more efficiently, though it initially resulted in decreased demand for ether, potentially impacting its market price. Additionally, some Layer 2 networks, like Blast, experienced temporary outages following the upgrade. As with any major software change, the Dencun update carries risks of bugs, security vulnerabilities, and other unanticipated issues that could affect the Ethereum network’s adoption and the value of ether.

Current wording

While the Merge significantly reduced Ethereum’s energy consumption by approximately 99.95%, it did not immediately address all scalability challenges. Subsequent upgrades, such as the “Dencun” update in March 2024, have been implemented to further enhance scalability and efficiency. This planned fork introduced several EIPs, including EIP 4844, aimed at reducing transaction fees for Layer 2 solutions by providing temporary storage spaces called Binary Large Objects (“blobs”) on the Layer 1 Ethereum network. This change is expected to lower costs for Layer 2 solutions by storing batched transactions more efficiently, though it initially resulted in decreased demand for ether, potentially impacting its market price. Additionally, some Layer 2 networks, like Blast, experienced temporary outages following the upgrade. As with any major software change, the Dencun update carries risks of bugs, security vulnerabilities, and other unanticipated issues that could affect the Ethereum network’s adoption and the value of ether.

Previous wording

The rate at which new ether is issued and put into circulation is variable and influenced by several mechanisms within the Ethereum network. Unlike Bitcoin network, the Ethereum network has no formal cap on its total supply. However, it employs various mechanisms that collectively limit the ether supply. These mechanisms, known as the “Ethereum Triple Halving,” have been instrumental in reducing the issuance of new ether.

Current wording

The rate at which new ether is issued and put into circulation is variable and influenced by several mechanisms within the Ethereum network. Unlike the Bitcoin network, the Ethereum network has no formal cap on its total supply. However, it employs various mechanisms that collectively limit the ether supply. These mechanisms, known as the “Ethereum Triple Halving,” have been instrumental in reducing the issuance of new ether.

Previous wording

The Ethereum network, like many other digital asset networks, faces significant scaling challenges due to due to inherent trade-offs between security and scalability in public blockchains. One means through which public blockchains achieve security is decentralization, meaning that no intermediary is responsible for securing and maintaining these systems. A higher degree of decentralization generally means a given digital asset network is less susceptible to manipulation or capture. In practice, this typically means that every single validator on a given digital asset network is responsible for securing the system by processing every transaction and every single full node is responsible for maintaining a copy of the entire ledger of the network. As a result, a digital asset network may be limited in the number of transactions it can process because all validators participate in validating each block and each fully participating node must store and validate all transactions.

Current wording

The Ethereum network, like many other digital asset networks, faces significant scaling challenges due to inherent trade-offs between security and scalability in public blockchains. One means through which public blockchains achieve security is decentralization, meaning that no intermediary is responsible for securing and maintaining these systems. A higher degree of decentralization generally means a given digital asset network is less susceptible to manipulation or capture. In practice, this typically means that every single validator on a given digital asset network is responsible for securing the system by processing every transaction and every single full node is responsible for maintaining a copy of the entire ledger of the network. As a result, a digital asset network may be limited in the number of transactions it can process because all validators participate in validating each block and each fully participating node must store and validate all transactions.

Previous wording

As of December 2024, the Ethereum network handled approximately 15 transactions per second on its Layer 1 base layer. In an effort to increase the volume of transactions that can be processed on a given digital asset network, many digital assets have implemented or are exploring various features to increase the speed and throughput of transactions. However, if improvements in transaction throughput lag behind growth in the use of digital asset networks, average fees and settlement times may increase considerably. For example, the Ethereum network has been, at times, at capacity, which has led to increased transaction fees. Since October 2015, ether transaction fees have increased from $0.00072 average daily transaction fees per ether transaction to a high of up to approximately $200 (paid in ether) average daily transaction fees per transaction on April 30, 2022. As of December 31, 2024, ether transaction fees stood at $1.01 (paid in ether) per transaction, on average. Increased fees and decreased settlement speeds could preclude certain uses for ether (e.g., micropayments), and could reduce demand for, and the price of, ether.

Current wording

As of December 2025, the Ethereum network handled approximately 16 transactions per second on its Layer 1 base layer. In an effort to increase the volume of transactions that can be processed on a given digital asset network, many digital assets have implemented or are exploring various features to increase the speed and throughput of transactions. However, if improvements in transaction throughput lag behind growth in the use of digital asset networks, average fees and settlement times may increase considerably. For example, the Ethereum network has been, at times, at capacity, which has led to increased transaction fees. Since October 2015, ether transaction fees have increased from $0.0011 average daily transaction fees per ether transaction to a high of up to approximately $200 (paid in ether) average daily transaction fees per transaction on April 30, 2022. As of December 31, 2025, ether transaction fees stood at $1.03 (paid in ether) per transaction, on average. Increased fees and decreased settlement speeds could preclude certain uses for ether (e.g., micropayments), and could reduce demand for, and the price of, ether.

Previous wording

Following the Merge, core development of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increase speed, throughput and scalability and also improve existing or next-generation uses. To address scaling issues such as network congestion, slow throughput and periods of high transaction fees owing to spikes in network demand, the Ethereum community has shifted its strategy from traditional sharding to a rollup-centric roadmap. Initially, sharding was proposed to increase Ethereum’s of the Ethereum blockchain by splitting the blockchain into subsections, called shards, and dividing validation responsibility so that a defined subset of validators would be responsible for each shard, rather than all validators being responsible for the entire blockchain, allowing for parallel processing and validation of transactions. This approach aimed to enable parallel processing and validation of transactions. However, with the rapid advancement of Layer 2 scalability solutions, which process transactions off-chain and submit bundled data to the main Ethereum network, the focus has transitioned to enhancing these rollups. The launch of proto-danksharding (known as "EIP-4844") in the “Dencun” upgrade in March 2024 introduces “blob-carrying transactions,” allowing rollups to add data blobs to blocks at a lower cost. These blobs are not accessible to the Ethereum Virtual Machine ("EVM") and are automatically deleted after a set period, reducing long-term storage requirements.

Current wording

Following the Merge, core development of the Ethereum source code has increasingly focused on modifications of the Ethereum protocol to increase speed, throughput and scalability and also improve existing or next-generation uses. To address scaling issues such as network congestion, slow throughput and periods of high transaction fees owing to spikes in network demand, the Ethereum community has shifted its strategy from traditional sharding to a rollup-centric roadmap. Initially, sharding was proposed to increase Ethereum’s blockchain by splitting the blockchain into subsections, called shards, and dividing validation responsibility so that a defined subset of validators would be responsible for each shard, rather than all validators being responsible for the entire blockchain, allowing for parallel processing and validation of transactions. This approach aimed to enable parallel processing and validation of transactions. However, with the rapid advancement of Layer 2 scalability solutions, which process transactions off-chain and submit bundled data to the main Ethereum network, the focus has transitioned to enhancing these rollups. The launch of proto-danksharding (known as "EIP-4844") in the “Dencun” upgrade in March 2024 introduces “blob-carrying transactions,” allowing rollups to add data blobs to blocks at a lower cost. These blobs are not accessible to the EVM and are automatically deleted after a set period, reducing long-term storage requirements.

Previous wording

Layer 2 solutions aim to increase throughput and reduce transaction fees by handling or validating transactions off the main Ethereum network (known as “Layer 1”) and then attempting to take advantage of the perceived security and integrity advantages of the Layer 1 Ethereum network by uploading the transactions validated on the Layer 2 protocol back to the Layer 1 Ethereum network. The details of how this is done vary significantly between different Layer 2 technologies and implementations. Key Layer 2 implementations include “rollups,” which execute transactions outside the Layer 1 blockchain and then post the data, typically in batches, back to the Layer 1 Ethereum blockchain where consensus is reached. “Zero knowledge rollups” are generally designed to run the computation needed to validate the transactions off-chain, on the Layer 2 protocol, and submit a proof of validity of a batch of transactions (not the entire transactions themselves). By contrast, “optimistic rollups” assume transactions are valid by default and only run computation, via a fraud proof, in the event of a challenge. Other proposed Layer 2 scaling solutions include, among others, “state channels,” which are designed to allow participants to run a large number of transactions on the Layer 2 side channel protocol and only submit two transactions to the main Layer 1 Ethereum blockchain (the transaction opening the state channel, and the transaction closing the channel); and “side chains,” in which an entire Layer 2 blockchain network with similar capabilities similar to those of the existing Layer 1 Ethereum blockchain runs in parallel with the existing Layer 1 Ethereum blockchain and allows smart contracts and DApps to run on the Layer 2 side chain without burdening the main Layer 1 network, and others. To date, the Ethereum network community has not coalesced overwhelmingly around any particular Layer 2 solution, though this could change.

Current wording

Layer 2 solutions aim to increase throughput and reduce transaction fees by handling or validating transactions off the main Ethereum network (known as “Layer 1”) and then attempting to take advantage of the perceived security and integrity advantages of the Layer 1 Ethereum network by uploading the transactions validated on the Layer 2 protocol back to the Layer 1 Ethereum network. The details of how this is done vary significantly between different Layer 2 technologies and implementations. Key Layer 2 implementations include “rollups,” which execute transactions outside the Layer 1 blockchain and then post the data, typically in batches, back to the Layer 1 Ethereum blockchain where consensus is reached. “Zero knowledge rollups” are generally designed to run the computation needed to validate the transactions off-chain, on the Layer 2 protocol, and submit a proof of validity of a batch of transactions (not the entire transactions themselves). By contrast, “optimistic rollups” assume transactions are valid by default and only run computation, via a fraud proof, in the event of a challenge. Other proposed Layer 2 scaling solutions include, among others, “state channels,” which are designed to allow participants to run a large number of transactions on the Layer 2 side channel protocol and only submit two transactions to the main Layer 1 Ethereum blockchain (the transaction opening the state channel, and the transaction closing the channel); and “side chains,” in which an entire Layer 2 blockchain network with similar capabilities to those of the existing Layer 1 Ethereum blockchain runs in parallel with the existing Layer 1 Ethereum blockchain and allows smart contracts and DApps to run on the Layer 2 side chain without burdening the main Layer 1 network, and others. To date, the Ethereum network community has not coalesced overwhelmingly around any particular Layer 2 solution, though this could change.

Previous wording

These MEV practices can undermine transaction predictability and fairness, potentially deterring users from engaging with DeFi protocols or the Ethereum network. Regulatory bodies have begun to scrutinize MEV activities. In May 2024, the European Union, under the Markets in Crypto-Assets ("MiCA") regulation, designated MEV as a form of illegal market abuse, aiming to curb sophisticated market manipulation and promote fair participation. Additionally, in May 2024, U.S. prosecutors charged two individuals with exploiting the Ethereum blockchain to steal $25 million through MEV manipulation, marking the first criminal case involving this type of exploitation. Such regulatory actions could lead to stricter oversight and potential restrictions on MEV-related practices, affecting the attractiveness of the Ethereum network for users and validators, which may adversely impact the value of ether and, by extension, the value of the Shares.

Current wording

These MEV practices can undermine transaction predictability and fairness, potentially deterring users from engaging with DeFi protocols or the Ethereum network. Regulatory bodies have begun to scrutinize MEV activities. In May 2024, the European Union, under the MiCA regulation, designated MEV as a form of illegal market abuse, aiming to curb sophisticated market manipulation and promote fair participation. Additionally, in May 2024, U.S. prosecutors charged two individuals with exploiting the Ethereum blockchain to steal $25 million through MEV manipulation, marking the first criminal case involving this type of exploitation. Such regulatory actions could lead to stricter oversight and potential restrictions on MEV-related practices, affecting the attractiveness of the Ethereum network for users and validators, which may adversely impact the value of ether and, by extension, the value of the Shares.

Previous wording

As of December 31, 2024, Lido remains the largest protocol by Total Value Locked ("TVL") in ether, boasting over $31.79 billion in TVL. It operates over 1 million validators, covering 54.10% of the Ethereum network. This significant concentration of staked ether under a single platform raises concerns about potential centralization within the Ethereum network. While it is generally believed that Lido has minimal incentive to disrupt transaction finality or block confirmations—given the risk of its entire stake being slashed (i.e., confiscated) if it attempts such interference—there are ongoing centralization concerns. These concerns are partly mitigated by the fact that Lido does not directly control most of the third-party node operators that stake its ether. Additionally, manipulating Ethereum’s consensus mechanism would likely cause a significant drop in ether’s value, which would economically harm Lido.

Current wording

As of December 31, 2025, Lido remains the largest protocol by Total Value Locked ("TVL") in ether, boasting over $26.79 billion in TVL. It operates over 1 million validators, covering 48.80% of the Ethereum network. This significant concentration of staked ether under a single platform raises concerns about potential centralization within the Ethereum network. While it is generally believed that Lido has minimal incentive to disrupt transaction finality or block confirmations—given the risk of its entire stake being slashed (i.e., confiscated) if it attempts such interference—there are ongoing centralization concerns. These concerns are partly mitigated by the fact that Lido does not directly control most of the third-party node operators that stake its ether. Additionally, manipulating Ethereum’s consensus mechanism would likely cause a significant drop in ether’s value, which would economically harm Lido.

Previous wording

Federal and state regulators including FinCEN and OFAC have been examining the operations of digital asset networks, digital asset users and the digital asset markets, with particular focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, evade sanctions, or fund criminal or terrorist enterprises. For example, certain privacy-enhancing features have been, or are expected to be, introduced to a number of digital asset networks, and these features may provide law enforcement agencies with less visibility into transaction-level data. Europol, the European Union’s law enforcement agency, released a report in October 2017 noting the increased use of privacy-enhancing digital assets like Zcash and Monero in criminal activity on the internet. In August 2022, OFAC banned all transactions by U.S. persons or in the United States involving Tornado Cash, a digital asset protocol designed to obfuscate blockchain transactions, by adding Tornado Cash and certain Ethereum wallet addresses associated with the protocol to its Specially Designated Nationals and Blocked Persons List A large portion of validators globally, as well as notable industry participants such as Centre, the issuer of the USDC stablecoin, have reportedly complied with the sanctions and blacklisted the sanctioned addresses from interacting with their networks. In October 2023, FinCEN issued a notice of proposed rulemaking that identified convertible virtual currency ("CVC") mixing as a class of transactions of primary money laundering concern and proposed requiring covered financial institutions to implement certain recordkeeping and reporting requirements on transactions that covered financial institutions know, suspect, or have reason to suspect involve CVC mixing within or involving jurisdictions outside the United States. The DOJ has also arrested and charged the developers of certain digital asset networks and digital assets for crimes related to money laundering and other offenses.

Current wording

Federal and state regulators including FinCEN and OFAC have been examining the operations of digital asset networks, digital asset users and the digital asset markets, with particular focus on the extent to which digital assets can be used to launder the proceeds of illegal activities, evade sanctions, or fund criminal or terrorist enterprises. For example, certain privacy-enhancing features have been, or are expected to be, introduced to a number of digital asset networks, and these features may provide law enforcement agencies with less visibility into transaction-level data. Europol, the European Union’s law enforcement agency, released a report in October 2017 noting the increased use of privacy-enhancing digital assets like Zcash and Monero in criminal activity on the internet. In August 2022, OFAC banned all transactions by U.S. persons or in the United States involving Tornado Cash, a digital asset protocol designed to obfuscate blockchain transactions, by adding Tornado Cash and certain Ethereum wallet addresses associated with the protocol to its Specially Designated Nationals and Blocked Persons List. A large portion of validators globally, as well as notable industry participants such as Centre, the issuer of the USDC stablecoin, have reportedly complied with the sanctions and blacklisted the sanctioned addresses from interacting with their networks. In October 2023, FinCEN issued a notice of proposed rulemaking that identified CVC mixing as a class of transactions of primary money laundering concern and proposed requiring covered financial institutions to implement certain recordkeeping and reporting requirements on transactions that covered financial institutions know, suspect, or have reason to suspect involve CVC mixing within or involving jurisdictions outside the United States. The DOJ has also arrested and charged the developers of certain digital asset networks and digital assets for crimes related to money laundering and other offenses.

Previous wording

Furthermore, Authorized Participants, as broker-dealers, and the Prime Execution Agent and Ether Custodian, as entities licensed to conduct virtual currency business activity by the New York Department of Financial Services and as limited-purpose trust companies subject to New York Banking Law, respectively, are “financial institutions” subject to the U.S. Bank Secrecy Act, as amended (“BSA”), and U.S. economic sanctions laws. The Trust will only accept creation and redemption requests from Authorized Participants who have represented to the Trust that they have implemented compliance programs that are designed to ensure compliance with applicable sanctions and anti-money laundering laws. The Trust will not hold any ether except that which has been delivered by approved Ether Trading Counterparties or by execution through the Prime Execution Agent, in connection with Authorized Participant creation requests. Moreover, the Prime Execution Agent has represented to the Trust that it has implemented and will maintain and follow compliance programs that are designed to comply with applicable sanctions and anti-money laundering laws and that it performs both initial and ongoing due diligence on each of its customers as well as ongoing transaction monitoring that is designed to identify and report suspicious activity conducted through customer accounts, including those opened by the Authorized Participants or their agents/partners for purposes of facilitating ether deposits to, and withdrawals from, the Trust’s Trading Balance, as required by law.

Current wording

Furthermore, Authorized Participants, as broker-dealers, and the Prime Execution Agent and Ether Custodian, as entities licensed to conduct virtual currency business activity by the New York Department of Financial Services and as limited-purpose trust companies subject to New York Banking Law, respectively, are “financial institutions” subject to the U.S. Bank Secrecy Act, as amended, and U.S. economic sanctions laws. The Trust will only accept creation and redemption requests from Authorized Participants who have represented to the Trust that they have implemented compliance programs that are designed to ensure compliance with applicable sanctions and anti-money laundering laws. The Trust will not hold any ether except that which has been delivered by approved Ether Trading Counterparties or by execution through the Prime Execution Agent, in connection with Authorized Participant creation requests. Moreover, the Prime Execution Agent has represented to the Trust that it has implemented and will maintain and follow compliance programs that are designed to comply with applicable sanctions and anti-money laundering laws and that it performs both initial and ongoing due diligence on each of its customers as well as ongoing transaction monitoring that is designed to identify and report suspicious activity conducted through customer accounts, including those opened by the Authorized Participants or their agents/partners for purposes of facilitating ether deposits to, and withdrawals from, the Trust’s Trading Balance, as required by law.

Previous wording

The Ethereum network relies on open-source protocols, which means that any user can become a node by downloading the Ethereum Client, a software application that implements the Ethereum network specification, modifying it, and proposing that other nodes, validators, and users adopt those changes. While anyone can propose modifications, the Ethereum Foundation and core developers are influential in initiating updates to the Ethereum network’s source code. However, the adoption of proposed updates is not automatic and depends on decentralized consensus. For any modification to be effective, Ethereum nodes must choose to download and implement the updated source code in their individual Ethereum Clients. The adoption process ultimately relies on a critical mass of validators, DApps developers, smart contract developers, and other users who transact on the Ethereum network to support the proposed changes. However, this process is not guaranteed to succeed. If a significant majority of validators and users do not support a proposed modification, or if the modification is not backward-compatible, it may result in a split of Ethereum network, known as a “hard fork.” In the event of a hard fork, one group of nodes may continue running the pre-modified software while another group adopts the new version, resulting in two distinct versions of the Ethereum network operating on separate blockchains with no interchangeability between them. Hard forks can be disruptive, leading to fragmentation of the network’s user base, developers, and validators. This division may weaken the security of each network if the number of validators becomes too small, increasing vulnerability to attacks or reduced functionality. Additionally, competing parallel blockchains may confuse users and reduce overall adoption of updates and modifications to the Ethereum network’s source code, potentially impacting the value and utility of ether-based assets, including the Shares. Contentious debates among network participants regarding proposed updates can further complicate this process, sometimes leading to ill will among developers, validators, and other stakeholders.

Current wording

The Ethereum network relies on open-source protocols, which means that any user can become a node by downloading the Ethereum Client, a software application that implements the Ethereum network specification, modifying it, and proposing that other nodes, validators, and users adopt those changes. While anyone can propose modifications, the Ethereum Foundation and core developers are influential in initiating updates to the Ethereum network’s source code. However, the adoption of proposed updates is not automatic and depends on decentralized consensus. For any modification to be effective, Ethereum nodes must choose to download and implement the updated source code in their individual Ethereum Clients. The adoption process ultimately relies on a critical mass of validators, DApps developers, smart contract developers, and other users who transact on the Ethereum network to support the proposed changes. However, this process is not guaranteed to succeed. If a significant majority of validators and users do not support a proposed modification, or if the modification is not backward-compatible, it may result in a split of the Ethereum network, known as a “hard fork.” In the event of a hard fork, one group of nodes may continue running the pre-modified software while another group adopts the new version, resulting in two distinct versions of the Ethereum network operating on separate blockchains with no interchangeability between them. Hard forks can be disruptive, leading to fragmentation of the network’s user base, developers, and validators. This division may weaken the security of each network if the number of validators becomes too small, increasing vulnerability to attacks or reduced functionality. Additionally, competing parallel blockchains may confuse users and reduce overall adoption of updates and modifications to the Ethereum network’s source code, potentially impacting the value and utility of ether-based assets, including the Shares. Contentious debates among network participants regarding proposed updates can further complicate this process, sometimes leading to ill will among developers, validators, and other stakeholders.

Previous wording

Ether’s protocols may also be cloned. Unlike a hard fork, which modifies an existing blockchain and results in two networks with the same genesis block, a clone is a copy of a protocol’s codebase that results in an entirely new blockchain with a new genesis block. Tokens are created solely from the new “clone” network, and, unlike with hard forks, holders of tokens from the original network do not automatically receive tokens from the cloned network. A clone creates a competing network with characteristics substantially similar to the original network but with modifications introduced by the developers of the clone. This competition may affect the market dynamics of the original network. For example, in September 2020, Binance launched Binance Smart Chain ("BSC"), a separate blockchain network from Ethereum network, by cloning the open-source code of Ethereum network. BSC utilizes the

Current wording

Ether’s protocols may also be cloned. Unlike a hard fork, which modifies an existing blockchain and results in two networks with the same genesis block, a clone is a copy of a protocol’s codebase that results in an entirely new blockchain with a new genesis block. Tokens are created solely from the new “clone” network, and, unlike with hard forks, holders of tokens from the original network do not automatically receive tokens from the cloned network. A clone creates a competing network with characteristics substantially similar to the original network but with modifications introduced by the developers of the clone. This competition may affect the market dynamics of the original network. For example, in September 2020, Binance launched Binance Smart Chain ("BSC"), a separate blockchain network from the Ethereum network, by cloning the open-source code of Ethereum network. BSC utilizes the Proof-of-Staked Authority consensus mechanism, differing from Ethereum’s Proof-of-Stake model, which enables BSC to offer faster transactions and lower fees, making it particularly attractive for DApps.

Previous wording

Proof-of-Staked Authority ("PoSA") consensus mechanism, differing from Ethereum’s Proof-of-Stake model, which enables BSC to offer faster transactions and lower fees, making it particularly attractive for DApps. Moreover, BSC maintains compatibility with EVM, allowing developers to seamlessly migrate Ethereum-based DApps to BSC. The emergence of BSC introduced a competitive alternative to Ethereum network, potentially influencing ether’s market dynamics. BSC’s lower transaction fees and faster processing times attracted users and developers, leading to a diversification of activity across multiple platforms, which may have impacted the demand for ether, as some DeFi projects and users opted for BSC’s more cost-effective solutions, which could potentially affect the value of the Shares.

Current wording

Moreover, BSC maintains compatibility with EVM, allowing developers to seamlessly migrate Ethereum-based DApps to BSC. The emergence of BSC introduced a competitive alternative to Ethereum network, potentially influencing ether’s market dynamics. BSC’s lower transaction fees and faster processing times attracted users and developers, leading to a diversification of activity across multiple platforms, which may have impacted the demand for ether, as some DeFi projects and users opted for BSC’s more cost-effective solutions, which could potentially affect the value of the Shares.

Previous wording

In particular, in the two weeks that followed the February 7, 2014, halt of bitcoin withdrawals from Mt. Gox, the price of bitcoin fell on other exchanges dropped from around $795 on February 6, 2014, to $578 on February 20, 2014. Additionally, in December 2020, the Russian cryptocurrency exchange Livecoin experienced a major security breach, during which hackers gained control of its servers and manipulated the exchange rates, inflating the prices of bitcoin and ether from their actual values to over $450,000 and $15,000, respectively. Exploiting these artificially inflated prices, the hackers cashed out substantial profits. Without control over its systems, Livecoin was unable to prevent or mitigate the damage, leading to significant financial losses. More recently, in July 2024, the popular Indian cryptocurrency exchange WazirX suffered a significant security breach resulting in the loss of approximately $235 million, which accounted for nearly half of its total reserves. According to its latest Proof of Reserve report, the exchange held assets valued at just over $502 million. The compromised assets included roughly $52 million in Ether, along with various other digital assets.

Current wording

In particular, in the two weeks that followed the February 7, 2014, halt of bitcoin withdrawals from Mt. Gox, the price of bitcoin fell on other exchanges from around $795 on February 6, 2014, to $578 on February 20, 2014. Additionally, in December 2020, the Russian cryptocurrency exchange Livecoin experienced a major security breach, during which hackers gained control of its servers and manipulated the exchange rates, inflating the prices of bitcoin and ether from their actual values to over $450,000 and $15,000, respectively. Exploiting these artificially inflated prices, the hackers cashed out substantial profits. Without control over its systems, Livecoin was unable to prevent or mitigate the damage, leading to significant financial losses. More recently, in July 2024, the popular Indian cryptocurrency exchange WazirX suffered a significant security breach resulting in the loss of approximately $235 million, which accounted for nearly half of its total reserves. According to its latest Proof of Reserve report, the exchange held assets valued at just over $502 million. The compromised assets included roughly $52 million in Ether, along with various other digital assets.

Previous wording

The Shareholder is solely responsible for providing the Trust or its agent with accurate information with respect to its ether wallet and sending ensuring that their contributions are sent to the correct ether wallet address of the Trust. If a Shareholder’s contributions are sent to the wrong wallet address or are not delivered to the Trust, the Trust will have no liability to the Shareholder. If information provided by a Shareholder proves incorrect, and as a result, ether is not delivered to the Trust, the Trust will have no liability to the Shareholder for the Trust’s good faith reliance on such misinformation.

Current wording

The Shareholders are solely responsible for providing the Trust or its agent with accurate information with respect to its ether wallet and ensuring that their contributions are sent to the correct ether wallet address of the Trust. If a Shareholder’s contributions are sent to the wrong wallet address or are not delivered to the Trust, the Trust will have no liability to the Shareholder. If information provided by a Shareholder proves incorrect, and as a result, ether is not delivered to the Trust, the Trust will have no liability to the Shareholder for the Trust’s good faith reliance on such misinformation.

Previous wording

Transfers of ether among users are accomplished via ether transactions (i.e., sending ether from one user to another). The creation of an ether transaction requires the use of a unique numerical code known as a “private key.” In the absence of the correct private key corresponding to a holder’s particular ether, the ether is inaccessible. The custody of the Trust’s ether is handled by the Ether Custodian, and the transfer of ether to and from Authorized Participants is directed by the Sponsor. The Sponsor has reviewed and evaluated the procedures and internal controls of the Trust’s Ether Custodian to safeguard the Trust’s ether holdings. If the Ether Custodian’s internal procedures and controls are inadequate to safeguard the Trust’s ether holdings, and the Trust’s private keys are lost, destroyed or otherwise compromised and no accessible backup, the Trust will be unable to access its ether, which could result in a partial or total loss of the Trust’s ether holdings, leading to adverse impact on the value of an investment in the Shares.

Current wording

Transfers of ether among users are accomplished via ether transactions (i.e., sending ether from one user to another). The creation of an ether transaction requires the use of a unique numerical code known as a “private key.” In the absence of the correct private key corresponding to a holder’s particular ether, the ether is inaccessible. The custody of the Trust’s ether is handled by the Ether Custodian, and the transfer of ether to and from Authorized Participants is directed by the Sponsor. The Sponsor has reviewed and evaluated the procedures and internal controls of the Trust’s Ether Custodian to safeguard the Trust’s ether holdings. If the Ether Custodian’s internal procedures and controls are inadequate to safeguard the Trust’s ether holdings, and the Trust’s private keys are lost, destroyed or otherwise compromised and no accessible backup exists, the Trust will be unable to access its ether, which could result in a partial or total loss of the Trust’s ether holdings, leading to adverse impact on the value of an investment in the Shares.

Previous wording

The Ethereum network relies on the internet. A significant disruption of internet connectivity, whether regional or global, could halt or delay transaction processing and consensus operations on the Ethereum network until such disruptions are resolved. In the past, variants of digital assets have experienced denial-of-service (“DoS”) attacks, leading to temporary delays in block creation and asset transfers. While the Ethereum network has implemented protections against such attacks, the risk of temporary service disruptions remains.

Current wording

The Ethereum network relies on the internet. A significant disruption of internet connectivity, whether regional or global, could halt or delay transaction processing and consensus operations on the Ethereum network until such disruptions are resolved. In the past, variants of digital assets have experienced denial-of-service attacks, leading to temporary delays in block creation and asset transfers. While the Ethereum network has implemented protections against such attacks, the risk of temporary service disruptions remains.

Previous wording

Digital assets are also susceptible to border gateway protocol hijacking (“BGP hijacking”). Such an attack can be a very effective way for an attacker to intercept traffic en route to a legitimate destination. BGP hijacking impacts the way different nodes and validators are connected to one another by isolating portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending and other security issues. If BGP hijacking occurs on the Ethereum network, participants may lose faith in the security of Ether, which could affect bictoin’s value and consequently the value of the Shares.

Current wording

Digital assets are also susceptible to border gateway protocol hijacking (“BGP hijacking”). Such an attack can be a very effective way for an attacker to intercept traffic en route to a legitimate destination. BGP hijacking impacts the way different nodes and validators are connected to one another by isolating portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending and other security issues. If BGP hijacking occurs on the Ethereum network, participants may lose faith in the security of Ether, which could affect bitcoin’s value and consequently the value of the Shares.

Previous wording

Decentralized governance of the Ethereum network and potential amendments to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, could have a negative impact on the performance of the Trust.

Current wording

Decentralized governance of the Ethereum network and potential amendments to the Ethereum network’s protocols and software could, if accepted and authorized by the Ethereum network community, have a negative impact on the performance of the Trust.

Previous wording

Membership in the community of core developers evolves over time, largely based on self-determined participation in the resource section dedicated to Ether on GitHub.com. These developers gain influence through their ongoing contributions but are constrained by the decentralized nature of the network. In other words, the Ethereum network has no central decision-making body or clear manner in which participants can come to an agreement other than through overwhelming consensus. The lack of clarity on governance may adversely affect ether’s utility and ability to grow and face challenges, both of which may require solutions and directed effort to overcome problems, especially long-term problems. For example, in 2024, a vulnerability in one of programming languages used to write certain Ethereum smart contracts was discovered on the Ethereum blockchain, exposing certain smart contracts to potential exploitation, resulting in substantial financial losses for affected parties. Although patches were quickly released, concerns about the effectiveness of these solutions remain, underscoring the governance challenges in resolving security risks. To the extent lack of clarity in corporate governance of the Ethereum network leads to ineffective decision-making that slows development and growth, the value of the Shares may be adversely affected.

Current wording

Membership in the community of core developers evolves over time, largely based on self-determined participation in the resource section dedicated to Ether on GitHub.com. These developers gain influence through their ongoing contributions but are constrained by the decentralized nature of the network. In other words, the Ethereum network has no central decision-making body or clear manner in which participants can come to an agreement other than through overwhelming consensus. The lack of clarity on governance may adversely affect ether’s utility and ability to grow and face challenges, both of which may require solutions and directed effort to overcome problems, especially long-term problems. For example, in 2024, a vulnerability in one of the programming languages used to write certain Ethereum smart contracts was discovered on the Ethereum blockchain, exposing certain smart contracts to potential exploitation, resulting in substantial financial losses for affected parties. Although patches were quickly released, concerns about the effectiveness of these solutions remain, underscoring the governance challenges in resolving security risks. To the extent lack of clarity in corporate governance of the Ethereum network leads to ineffective decision-making that slows development and growth, the value of the Shares may be adversely affected.

Previous wording

While the Trust does not invest in stablecoins, it may nonetheless be exposed to risks that stablecoins pose for the ether market and other digital asset markets. Stablecoins are digital assets designed to have a stable value over time compared to typically volatile digital assets, and are typically marketed as being pegged to a fiat currency, such as the U.S. dollar, at a certain value. Although the prices of stablecoins are intended to be stable, their market value may fluctuate. This volatility has in the past apparently impacted the price of ether. Stablecoins are a relatively new phenomenon, and it is impossible to know all of the risks that they could pose to participants in the ether market. In addition, some have argued that certain stablecoins, particularly Tether, are improperly issued without sufficient backing which, when the stablecoin is used to pay for ether, could cause artificial rather than genuine demand for ether, artificially inflating the price of ether. There are also allegations that those associated with certain stablecoins may be involved in laundering money. On February 17, 2021, the New York Attorney General entered into an agreement with Tether’s operators, requiring them to cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statements made regarding the assets backing Tether. On October 15, 2021, the CFTC announced a settlement with Tether’s operators in which they agreed to pay $42.5 million in fines to settle charges that, among others, Tether’s claims of maintaining sufficient U.S. dollar reserves to back every Tether stablecoin in circulation with the “equivalent amount of corresponding fiat currency” held by Tether were untrue. In addition, a large amount of Tether is issued as ERC-20 tokens on the Ethereum network. If Tether were to no longer be issued or to cease operating on the Ethereum network, demand for ether used to pay the gas fees for ERC-20 Tether transactions and a substantial source of demand for ether could decline, which may cause the price of ether to decrease. Any material decrease in the value of ether could negatively affect the value of the Shares.

Current wording

While the Trust does not invest in stablecoins, it may nonetheless be exposed to risks that stablecoins pose for the ether market and other digital asset markets. Stablecoins are digital assets designed to have a stable value over time compared to typically volatile digital assets, and are typically marketed as being pegged to a fiat currency, such as the U.S. dollar, at a certain value. Although the prices of stablecoins are intended to be stable, their market value may fluctuate. This volatility has in the past apparently impacted the price of ether. Stablecoins are a relatively new phenomenon, and it is impossible to know all of the risks that they could pose to participants in the ether market. In addition, stablecoins are subject to evolving regulatory requirements in the United States. For example, on July 18, 2025, President Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025 (the “GENIUS Act”) into law, establishing a federal framework for certain “payment stablecoins,” and U.S. regulators have begun related implementation efforts (including requests for comment and other actions). The GENIUS Act includes provisions addressing the regulatory treatment of certain “payment stablecoins,” including provisions that may affect whether certain payment stablecoins are treated as “securities” under the federal securities laws. However, the scope and interpretation of these provisions and their application to particular stablecoin structures may evolve and may not cover all stablecoin products, programs, or arrangements. In addition, some regulators have argued that certain stablecoins, particularly Tether, are improperly issued without sufficient backing which, when the stablecoin is used to pay for ether, could cause artificial rather than genuine demand for ether, artificially inflating the price of ether. There are also allegations that those associated with certain stablecoins may be involved in laundering money or evading sanctions. On February 23, 2021, the New York Attorney General announced a settlement with Tether’s operators, requiring them to cease any further trading activity with New York persons and pay $18.5 million in penalties for false and misleading statements made regarding the assets backing Tether. On October 15, 2021, the CFTC announced a settlement with Tether’s operators in which they agreed to pay $42.5 million in fines to settle charges that, among others, Tether’s claims of maintaining sufficient U.S. dollar reserves to back every Tether stablecoin in circulation with the “equivalent amount of corresponding fiat currency” held by Tether were untrue. In addition, in June 2025 the DOJ announced an action to recover approximately $225.3 million in USDT linked to alleged cryptocurrency investment scams, and in January 2026 the DOJ announced charges alleging that USDT and other crypto assets were used to launder proceeds of corruption. These and similar regulatory, supervisory, and …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

USDC is a reserve-backed stablecoin issued by Circle Internet Financial that is commonly used as a method of payment in digital asset markets, including the ether market. An affiliate of the Sponsor acts as investment manager to a money market fund, the Circle Reserve Fund, which the issuer of USDC uses to hold cash, U.S. Treasury bills, notes and other obligations issued or guaranteed as to principal and interest by the U.S. Treasury, and repurchase agreements secured by such obligations or cash, which serve as reserves backing USDC stablecoins. While USDC is designed to maintain a stable value at $1.00, on March 10, 2023, the value of USDC fell below $1.00 for multiple days after Circle Internet Financial disclosed that $3.3 billion of the USDC reserves were held at Silicon Valley Bank, which had entered FDIC receivership earlier that day. Since then, USDC has managed to restore its peg to $1.00 and has not experienced a depegging event of similar magnitude. Stablecoins are reliant on the U.S. banking system and U.S. treasuries, and the failure of either to function normally could affect stablecoin operations, and adversely affecting the value of the Shares. An affiliate of the Sponsor also has a minority equity interest in the issuer of USDC. Similar to Tether, a large amount of USDC is issued as ERC-20 tokens on the Ethereum network. If USDC were to no longer be issued or to cease operating on the Ethereum network, demand for ether used to pay the gas fees for ERC-20 USDC transactions could decline, and a substantial source of demand for ether could be eliminated, which could cause the price of ether to decrease, and negatively affect the value of the Shares.

Current wording

USDC is a reserve-backed stablecoin issued by Circle Internet Financial that is commonly used as a method of payment in digital asset markets, including the ether market. An affiliate of the Sponsor acts as investment manager to a money market fund, the Circle Reserve Fund, which the issuer of USDC uses to hold cash, U.S. Treasury bills, notes and other obligations issued or guaranteed as to principal and interest by the U.S. Treasury, and repurchase agreements secured by such obligations or cash, which serve as reserves backing USDC stablecoins. While USDC is designed to maintain a stable value at $1.00, on March 10, 2023, the value of USDC fell below $1.00 for multiple days after Circle Internet Financial disclosed that $3.3 billion of the USDC reserves were held at Silicon Valley Bank, which had entered FDIC receivership earlier that day. Since then, USDC has generally traded near its intended $1.00 value, but it has experienced fluctuations. Stablecoins are reliant on the U.S. banking system and U.S. treasuries, and the failure of either to function normally could affect stablecoin operations, and adversely affecting the value of the Shares. In addition, implementation of the GENIUS Act and evolving U.S. stablecoin regulation could require stablecoin issuers and market participants to obtain licenses or approvals, satisfy reserve and disclosure requirements, or restrict certain activities, any of which could affect stablecoin availability and liquidity. An affiliate of the Sponsor also has a minority equity interest in the issuer of USDC. Similar to Tether, a large amount of USDC is issued as ERC-20 tokens on the Ethereum network. If USDC were to no longer be issued or to cease operating on the

Previous wording

Some stablecoins have been alleged to be securities under the federal securities laws. For example, on June 5, 2023, the SEC alleged in a complaint that the stablecoin BUSD, a U.S. dollar stablecoin issued by Binance, was a “crypto asset security” and that Binance “offered and sold to U.S. investors as part of a profit-earning scheme within the Binance ecosystem.” However, on June 28, 2024, a federal judge dismissed the SEC's claim that BUSD was a security, stating that the SEC failed to credibly establish that BUSD was offered or sold as such. In another example, the District

Current wording

Some stablecoins have been alleged to be securities under the federal securities laws and the regulatory status of stablecoins remains in flux. For example, on June 5, 2023, the SEC alleged in a complaint that the stablecoin BUSD, a U.S. dollar stablecoin associated with the Binance ecosystem, was a “crypto asset security” and that Binance “offered and sold to U.S. investors as part of a profit-earning scheme within the Binance ecosystem.” However, on June 28, 2024, a federal judge dismissed the SEC's claim that BUSD was a security, stating that the SEC failed to credibly establish that BUSD was offered or sold as such. On May 29, 2025, the SEC filed a joint stipulation to dismiss, with prejudice, the civil enforcement action against Binance entities and founder Changpeng Zhao, and stated that the dismissal decision did not necessarily reflect the Commission’s position on other litigation or proceedings. In another example, in November 2023, when the financial technology company PayPal disclosed in a filing that it had received a subpoena from the SEC relating to the PayPal USD stablecoin that requested the production of documents. PayPal later disclosed that, in February 2025, the SEC communicated it was closing this inquiry without enforcement action.

Previous wording

Given the foundational role that stablecoins play in global digital asset markets, their fundamental liquidity and actual stability can have a significant impact on the broader digital asset market, including the market for ether. Because a large portion of the digital asset market still depends on stablecoins such as Tether and USDC, there is a risk that a disorderly de-pegging or a run on Tether or USDC could lead to significant market volatility in digital assets more broadly. Volatility in stablecoins, operational issues with stablecoins (for example, technical issues that prevent settlement), concerns about the sufficiency of any reserves that support stablecoins or potential manipulative activity when unbacked stablecoins are used to pay for other digital assets (including ether), or regulatory concerns about stablecoin issuers or intermediaries, such as exchanges, that support stablecoins, could impact individuals’ willingness to trade on venues that rely on stablecoins, reduce liquidity in the ether market, and affect the value of ether, and in turn impact an investment in the Shares.

Current wording

Given the foundational role that stablecoins play in global digital asset markets, their fundamental liquidity and actual stability can have a significant impact on the broader digital asset market, including the market for ether. Because a large portion of the digital asset market still depends on stablecoins such as Tether and USDC, there is a risk that a disorderly de-pegging or a run on Tether or USDC could lead to significant market volatility in digital assets more broadly. Volatility in stablecoins, operational issues with stablecoins (for example, technical issues that prevent settlement), concerns about the sufficiency of any reserves that support stablecoins or potential manipulative activity when unbacked stablecoins are used to pay for other digital assets (including ether), or regulatory changes affecting stablecoin issuers or intermediaries, such as exchanges, that support stablecoins, and enforcement actions or sanctions targeting stablecoin-related activity could impact individuals’ willingness to trade on venues that rely on stablecoins, reduce liquidity in the ether market, and affect the value of ether, and in turn impact an investment in the Shares.

Previous wording

The Constituent Platforms have changed over time. For example, on January 25, 2019, ItBit was suspended from the Pricing Index due to data quality issues, which suspension was lifted on February 1, 2019 after the Benchmark Provider confirmed that data quality assurance measures were in place to identify the errors that the ItBit data contained through a full match of parameters. On August 30, 2019, Gemini was added to the Pricing Index. On October 28, 2019, Coinbase was added to the Pricing Index. On May 3, 2022, LMAX Digital was added to the Pricing Index. The Benchmark Provider, under the oversight of the CME CF Cryptocurrency Pricing Products Oversight Committee, may remove or add Constituent Platforms in the future at its discretion. For more information on the inclusion criteria for Constituent Platforms in the Pricing Index, see the section entitled “CME CF Ether Reference Rate – New York Variant (Pricing Index)” under Item 1 – Business of this Annual Report.

Current wording

The Constituent Platforms have changed over time. For example, on January 25, 2019, itBit was suspended from the Pricing Index due to data quality issues, which suspension was lifted on February 1, 2019 after the Benchmark Provider confirmed that data quality assurance measures were in place to identify the errors that the itBit data contained through a full match of parameters. On August 30, 2019, Gemini was added to the Pricing Index. On October 28, 2019, Coinbase was added to the Pricing Index. On May 3, 2022, LMAX Digital was added to the Pricing Index. The Benchmark Provider, under the oversight of the CME CF Cryptocurrency Pricing Products Oversight Committee, may remove or add Constituent Platforms in the future at its discretion. For more information on the inclusion criteria for Constituent Platforms in the Pricing Index, see the section entitled “The CME CF Ether – Dollar Reference Rate – New York Variant (Pricing Index)” under Item 1 – Business of this Annual Report.

Previous wording

Trust utilizes the Pricing Index to establish its NAV and NAV per Share. Any errors or delays in the Pricing Index could lead to inaccuracies in the NAV and NAV per Share, resulting in a different investment outcome for the Trust and its Shareholders than if these events had not occurred. Losses or costs associated with such errors or other risks would generally be borne by the Trust and its Shareholders. Neither the Sponsor nor its affiliates or agents provide any guarantees regarding the accuracy or timeliness of the Pricing Index.

Current wording

The Trust utilizes the Pricing Index to establish its NAV and NAV per Share. Any errors or delays in the Pricing Index could lead to inaccuracies in the NAV and NAV per Share, resulting in a different investment outcome for the Trust and its Shareholders than if these events had not occurred. Losses or costs associated with such errors or other risks would generally be borne by the Trust and its Shareholders. Neither the Sponsor nor its affiliates or agents provide any guarantees regarding the accuracy or timeliness of the Pricing Index.

Previous wording

In cases where Ethereum network encounters outages or other issuers, the liquidity of the Shares may decline and the price of the Shares may fluctuate independently of the price of ether. This could result in the Shares trading at a premium or discount to their NAV. Furthermore, in the event that the market for ether becomes relatively illiquid and thereby materially limiting opportunities for arbitraging by delivering ether in return for Baskets, the price of Shares may diverge from the value of underlying ether, potentially leading to adverse effects on an investment in the Shares.

Current wording

In cases where Ethereum network encounters outages or other issues, the liquidity of the Shares may decline and the price of the Shares may fluctuate independently of the price of ether. This could result in the Shares trading at a premium or discount to their NAV. Furthermore, in the event that the market for ether becomes relatively illiquid and thereby materially limiting opportunities for arbitraging by delivering ether in return for Baskets, the price of Shares may diverge from the value of underlying ether, potentially leading to adverse effects on an investment in the Shares.

Previous wording

Additionally, the Sponsor and its management have limited experience in managing an ether exchange-traded product, a novel type of investment vehicle. The Sponsor is not registered as an investment adviser under the Investment Advisers Act of 1940 or as a commodity pool operator or commodity trading adviser under the Commodity Exchange

Current wording

Additionally, the Sponsor and its management have limited experience in managing an ether exchange-traded product, a novel type of investment vehicle. The Sponsor is not registered as an investment adviser under the Investment Advisers Act of 1940 or as a commodity pool operator or commodity trading adviser under the Commodity Exchange Act. This lack of a track record may impact the Sponsor’s ability to effectively manage the Trust, potentially leading to operational issues.

Previous wording

The Trust’s operations rely heavily on the Sponsor, whose limited staffing, potential discontinuance, and conflicts of interests could adversely impact the Trust’s management and stability and the value of the Shares.

Current wording

The Trust’s operations rely heavily on the Sponsor, whose limited staffing, potential discontinuance, and conflicts of interest could adversely impact the Trust’s management and stability and the value of the Shares.

Previous wording

In addition, the hedging mechanisms employed by Authorized Participants and market makers, such futures contracts, to hedge their exposure to ether may not always function as intended during periods of market stress. For example, the ether futures market, although growing, has a limited history and may be less liquid, more volatile, and more susceptible to rapid market fluctuations compared to more established futures markets. Inability to hedge through futures due to liquidity constraints or regulatory changes may further impede the ability of Authorized Participants to manage their exposure, potentially reducing liquidity in the Shares and increasing price volatility.

Current wording

In addition, the hedging mechanisms employed by Authorized Participants and market makers, such as futures contracts, to hedge their exposure to ether may not always function as intended during periods of market stress. For example, the ether futures market, although growing, has a limited history and may be less liquid, more volatile, and more susceptible to rapid market fluctuations compared to more established futures markets. Inability to hedge through futures due to liquidity constraints or regulatory changes may further impede the ability of Authorized Participants to manage their exposure, potentially reducing liquidity in the Shares and increasing price volatility.

Previous wording

The Trust and the Sponsor face competition with respect to the creation of competing exchange-traded ether products. As of December 31, 2024, ether was the second-largest digital asset by market capitalization as tracked by CoinMarketCap.com, with a valuation of approximately $407.6 billion. The digital asset landscape has expanded significantly, now encompassing over 10,000 cryptocurrencies with a combined market capitalization exceeding $3.3 trillion as tracked by CoinMarketCap.com. Notably, platforms such as Solana, Avalanche, and Cardano have gained traction, offering competitive smart contract capabilities. Additionally, numerous consortiums and financial institutions continue to explore and invest in private or permissioned smart contract platforms, which may present further competition to open networks like Ethereum. The growth and adoption of these alternative digital assets and platforms could negatively impact the demand for, and price of, ether, thereby adversely affecting the value of the Shares.

Current wording

The Trust and the Sponsor face competition with respect to the creation of competing exchange-traded ether products. As of December 31, 2025, ether was the second-largest digital asset by market capitalization as tracked by CoinMarketCap.com, with a valuation of approximately $358.1 billion. The digital asset landscape has expanded significantly, now encompassing over 10,000 cryptocurrencies with a combined market capitalization exceeding $2.4 trillion as tracked by CoinMarketCap.com. Notably, platforms such as Solana, Avalanche, and Cardano have gained traction, offering competitive smart contract capabilities. Additionally, numerous consortiums and financial institutions continue to explore and invest in private or permissioned smart contract platforms, which may present further competition to open networks like Ethereum. The growth and adoption of these alternative digital assets and platforms could negatively impact the demand for, and price of, ether, thereby adversely affecting the value of the Shares.

Previous wording

Each outstanding Share represents a unit of undivided beneficial ownership of the Trust, which does not generate any income. Since the Trust regularly transfers ether to pay the Sponsor Fee and extraordinary, non-recurring expenses not assumed by the Sponsor, the amount of ether represented by each Share will gradually decline over time. This decrease happens even with Shares issued in exchange for additional deposits of ether or cash used to acquire ether over time, as the amount of ether required to create Share will be adjusted to match the current proportion of ether per Share outstanding.

Current wording

Each outstanding Share represents a unit of undivided beneficial ownership of the Trust, which does not generate any income. Since the Trust regularly transfers ether to pay the Sponsor Fee and extraordinary, non-recurring expenses not assumed by the Sponsor, the amount of ether represented by each Share will gradually decline over time. This decrease happens even with Shares issued in exchange for additional deposits of ether or cash used to acquire ether over time, as the amount of ether required to create a Share will be adjusted to match the current proportion of ether per Share outstanding.